O. to Create Loopholes for Venture Capitalists

From our friends at the American Small Business League. We posted an earlier press release from them about Obama’s appointment of Karen Gordon Mills as head of the Small Business Administration. The worry was that this would signal that the incoming administration would continue the practice of past administrations of channeling contracts set aside for small businesses to larger firms. This proposed change in federal contracting law indicates that those worries were justified.

Obama To Create Loopholes for Venture Capitalists

Petaluma, Calif. – President-elect Barack Obama is preparing to createsignificant changes in federal contracting law that will allow some ofthe nation’s wealthiest investors to receive federal contractsearmarked for small businesses. Under the banner of “increasing accessto capital” for small businesses, the policies will allow firmscontrolled by individual venture capitalist and even large venturecapital firms to participate in federal small business contractingprograms.

The Obama Administration’s new pro-venture capital policy couldvirtually repeal the Small Business Act for legitimate American smallbusinesses by modifying the longstanding federal definition of a smallbusiness as “independently owned.”

Under the proposed Obama Administration policy, “independently owned”will be changed to include firms that are not independently owned, butare actually controlled by wealthy investors and possibly some of thenation’s largest venture capital firms.

Opponents of the new policy say it appears to be designed more toincrease wealthy venture capitalist access to billions of dollars infederal small business contracts as opposed to “increasing access tocapital” for legitimate small businesses.

If the policy is successfully implemented it could force the averageAmerican small business to compete head-to-head with firms controlledby wealthy investors for even the smallest government orders for goodsand services. Thousands of middle class jobs could be lost as billionsof dollars in federal small business contracts are diverted to a smallnumber of venture capitalist controlled firms.

The plan will likely include a provision that would exempt the venturecapitalist owned firms from capital gains taxes. The Obama-BidenTransition Team website, www.change.gov mentions such a proposal.

The appointment of multi-millionaire venture capitalist Karen Mills tohead the Small Business Administration (SBA) is the latest indicationthat President-elect Obama is moving forward with his plans to divertgovernment small business contracts to venture capital controlledfirms.

The National Venture Capital Association (NVCA) and its members havebeen lobbying for the new loophole in federal contracting law for morethan two years. The NVCA and its members have contributed millions ofdollars to Obama and key Democratic leaders in Congress such as NancyPelosi, John Kerry, Joe Lieberman and Hillary Clinton.

“The easiest and quickest way to stimulate our nation’s failingeconomy is for the government to spend infrastructure funds withAmerica’s 27 million small businesses that create all the new jobs andemploy most Americans,” American Small Business League President LloydChapman said. “This new Obama policy will do just the opposite andwill push our economy closer to a depression by diverting billions ofdollars in federal funds away from middle class America and into thehands of small number of wealthy investors that backed Obama.”